Sustainability as value driver. Henk de Bruin Royal Philips Electronics Senior Vice-President, Global Head of Sustainability

Transcription

1 Sustainability as value driver Henk de Bruin Royal Philips Electronics Senior Vice-President, Global Head of Sustainability

2 Content Introduction Strategic, business and innovation side of Sustainability Risk and reputation management side of Sustainability Full integrated Annual report Shareholder value side of Sustainability Organizational and engagement side of Sustainability Some 2010 achievements Conclusions 2 2

3 A strong diversified industrial group leading in health and well-being Founded in 1891 Headquartered in Amsterdam, the Netherlands Sales over EUR 22.2 billion in 2010 Growth Markets 32% of sales generated in Growth Markets Globally recognized brand (world top 50) Our brand value doubled to $8.7bn since ,000 employees Sales and service outlets in over 100 countries 1.5 billion investment in R&D, 7% of sales Note - All figures from the year 2010 onwards exclude Television as it is treated as discontinued operation 3

4 Our Health and Well-being offer is powered by 3 businesses 2010 Healthcare Lighting Consumer Lifestyle 4 4

5 Sustainability defined 1970 Report of Club of Rome: Limits to Growth 1987 Brundtland Report: Defining Sustainability Sustainability Meeting the needs of the present generation without compromising the ability of future generation to meet their own needs Sustainable Development (pathway to Sustainability) The simultaneous pursuit of economic prosperity, environmental quality and social equity Sustainable entrepreneurs Companies 5 that use sustainability as a paradigm shift to enhance growth and innovation and secure their future 5

6 What makes Philips different? Early start in Social Responsibility 1900 Various Health insurance Arrangements 1912 Profit sharing 1913 Pension Fund 1929 Philips Company School First phase of housing Program 1950 Collective Labor Agreement day working Week 6

7 What makes Philips different? Long history of Environmental Policy Participation in Club of Rome Corporate Environmental Function Energy and emission reduction Programs First Global Policy Second Global Policy Environmental Opportunity, first structured 4-year Program EcoVision1, 2, 3, 4, 5 7

8 Sustainability The two sided coin for companies Risk and reputation management Business opportunities 8 8

9 Positioning of companies Early stage Fully embedded License to operate Incremental improvements Breakthroughs Reactive Management Opportunistic and Ad Hoc Analytical and Systematic Integrated into Daily Operations Industry leader/ Market shaping Focus on complying with existing regulations to meet minimum social; health & safety; environmental and ethics standards. Green and social investments are considered cost Some sustainability awareness Management opportunistically takes advantage of low-cost, money-saving green projects Management opportunistically resolves supply sustainability issues Sustainability impact is systematically measured and analyzed; Information used by management to select improvement projects Company is building its understanding of the relationships between sustainability impact, cost and risk in its business Everyone in the company is expected to be involved in improving the company s sustainability performance Most ideas come from the bottom up. Sustainable becomes an integral part of what makes the company profitable Sustainability is accepted as strategic innovation driver and embedded as core business principle in all functions and sectors The organization is systematically developing, testing and implementing approaches on the leading edge of current sustainability practice and thinking Greater returns as sustainability becomes more integrated into core business strategy 9 Source: MIT Sloan Review, team analysis

10 A New Era of Sustainability UN Global Compact-Accenture CEO Study % of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company (up from 72% in 2007). 93% of CEOs believe that sustainability issues will be critical to the future success of their business. 91% of CEOs report that their company will employ new technologies (e.g., renewable energy, energy efficiency, information and communication technologies) to address sustainability issues over the next five years. 10

11 Four global trends that drives the Philips strategy are becoming increasingly relevant Aging population The rise of emerging markets and the urbanization 11 Increased consumer empowerment and sustainable lifestyles Climate change and sustainable development 11

12 Philips Vision 2015 outlines four key priorities Expand leadership positions while benefiting from markets growing faster than GDP Be the preferred brand in the majority of our chosen markets Lead in sustainability Be seen by all stakeholders as making a positive difference in people s lives 12 12

13 Driving Lead in Sustainability Subjects on Sustainability Management Agenda 2011 Leading Key Performance Indicators (3) Other Key Performance Indicators (10) Subjects of Green Manufacturing 2015* Performance Indicators (16) * Including Chemicals Management and Health & Safety 13

14 Sustainability simplified UN Human Development Index = life expectancy + education level + purchasing power Source: Ecological Footprint Atlas

15 EcoVision5: A holistic approach to Sustainability to seed mid- and long-term value creation (2015) Philips will bring care to more than 500 million people Philips will improve the energy efficiency of its overall portfolio by 50% Philips will double the global collection and recycling amounts of our products, as well as double the amount of recycled materials in our products Health & well-being (Social Innovation) 1 Ecological footprint (Green Innovation) 2 3 Strategic Focus: Sustainable health & wellbeing space 1 Lead by Healthcare 2 Lead by Lighting 3 Lead by Consumer Lifestyle 15

16 EcoVision5: Bringing care to people Our commitment By 2015, we will bring care to 500 million people What do we measure The number of people per year that benefit from our care products. Product categories involved All Healthcare products Water and air purification Oral care Anti bacterial UV lights Light therapy How do we achieve our target Increased patient throughput of MRI and CT scanners Nominal sales growth in the care categories >6% Increase of care products in portfolio mix 16 16

17 EcoVision5: Improving Energy Efficiency Our commitment By 2015, we will improve the energy efficiency of our overall product portfolio by 50% What do we measure Examples: Lighting lumen/watt; TV energy consumption per square inch How do we achieve our target Structurally embedding in technology roadmaps of the most contributing businesses Lighting contributes to total energy consumption of Philips product portfolio during use phase 89%, Consumer Lifestyle 10%, Healthcare 1% Lighting technology roadmaps on average light output in period shows an improvement of 58% particularly because of the growth of the LED market 17 17

18 EcoVision5: Closing the Material Loop Our commitment By 2015, we will double the global collection and recycling amounts of our products, as well as double the amount of recycled materials in our products What do we measure Measure recycled materials used in products (in kg/year) with a focus on metals and plastics Measure collected products for recycling (in kg/year) in collective and non collective systems How do we achieve our target Determine the baselines in 2010 Structural embedding in technology roadmaps of the contributing businesses such as TV and DA Focus on value recovery and cost savings when applying recycled materials in bill of materials 18 18

19 EcoVision products Green products characterized by Philips Green Focal Areas Life cycle approach to determine a product s overall environmental improvement One or more of our Green Focal Areas must be Significantly better (at least 10%) than the reference product* Resulting in a lower total environmental impact * reference product: Philips predecessor or closest commercial competitors 19

20 Example Lighting - Master LED glow 7W 75% energy reduction compared to incandescent lamp 25 times longer lifetime than comparable incandescent lamp 20

21 Example Healthcare - MammoDiagnost DR Energy Consumption Standby - 39% Operation - 68% CO 2 saving 6785 kg Packaging Weight - 11% Volume + 37% Weight - 13% Hazardous Substances Patient dose: -20% No fresh water & silver content No chemicals 21

22 Example Consumer Lifestyle - Performer EnergyCare New High Density (HD) motor to save energy Up to 35% more efficient than other green models in the market Packaging: >90% recycled material DFU/Leaflets: 100% recycled material Partly made of bio-based and recycled material materials Reducing demand for virgin materials, creating less waste Made of 97% PVC free material 22

23 Green Product Sales Progress made to date Green Innovation investments : 1 billion : 2 billion Target 23 23

24 Environmental impact** Sustainability as Innovation driver Sustainable innovation portfolio mapping tool Green breakthrough Sustainable Health & Wellbeing Green Innovation Green improvements Legal Compliance Most common business focus Sustainable Innovation Icons The rich Business Market Combinations The rich & the global middle class Social Innovation The rich & the global middle class & the poor Social impact* 24 24

25 Risk and reputation management Transparency required on Sustainability in Supply Chain (yearly performance, progress and corrective actions) 25 25

26 Risk and reputation management Transparency required on Business Ethics (yearly performance, progress and corrective actions) 26 26

27 Driving both sides of the coin External reporting has been instrumental 1998 Environmental Annual Reports (ecological dimension) 2002 Sustainability Annual Reports (economical [executive summary], ecological and social dimension including General Business Principles Reporting and Supply chain performance) 2008 Integration with Financial Report to One Philips report covering all three dimensions extensively 2009 One Philips Report web based only with print function and tailor made downloads 2010 One Philips Report with tailor made multistakeholder cross sections on screen or in downloads 27 Since 1998 all Philips environmental and sustainability reports have been externally verified (KPMG) and all dimensions in the integrated Annual report are externally verified 27

28 Reporting parameters on Sustainability According to Global Reporting Initiative* guidelines (GRI) Governance (17) Economic (25) Environment (18) Labor practices and decent work (10) Human Rights (7) Society (7) Product responsibility (5) *Philips is at the highest level (A + ) 28

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30 Sustainable entrepreneurs Dow Jones Sustainability Index 30

31 Relevance of Sustainability to the Investor Community (Source: Social Investment Forum and Eurosif 2008; Interbrand 2009) Analysis In the 2009 Interbrand calculations, Sustainability contributes to the Philips brand with 11% In the US 12% of invested capital is managed by professional fund managers that apply Sustainability performance as an entry ticket next to financial criteria. In Europe this professionally managed invested capital with Sustainability as an entry ticket has grown from 18% in 2008 to 47% in 2010 Investors key topics of interest (based on Sustainability road shows and questions of fund managers) View on climate change and the company strategy for that Green product sales and Green innovations Managing Sustainability in the Supply chain Closing material loops (collection & recycling; recycled content) HR data (gender and age composition, inflow and outflow of staff, etc.) Remuneration of company executives related to Sustainability 31 31

32 How we organized the governance on Sustainability Embedded in the business and functions Board of Management Sustainability Board chaired by BoM member Strategy MT Members from sectors Fiscal Product Development and R&D Finance Heads of Corporate Staff (Human Resources, Legal, R&D, Supply, Strategy, Marketing & Communication, Sustainability) Supply Management Manufacturing Marketing & Communication Legal Sustainability Management at Sectors, Businesses and Countries Facilitation by Corporate Sustainability Office 32

33 Sustainability functional network and its communities of practice Sustainability network Supplier Sustainability community Sustainable Innovation community EH&S regulatory community Green product development community EH&S in manufacturing community Green marketing community Collection & Recycling community Social Investment community Upstream VALUE CHAIN Downstream EH&S = Environment, Health & Safety 33

34 Sustainability Employee Engagement Score High Performance norm Philips total 2010 Philips total Lighting Healthcare Consumer Lifestyle Corporate Center 34

35 Some 2010 Sustainability Achievements Best Low Carbon Company 2010 in China Environmental leadership Award, Philippines EES Sustainability rating at 74% + 7% increase in Brand Value Responsible Supply Chain award CSR communication program, Argentina 35

36 Summary Philips has a strong sustainability heritage Philips raised the bar with the launch of our ambitious EcoVision5 targets for 2015, that go beyond environmental impact and which encompass our overall portfolio Philips will continue to leverage sustainability as an integral part of our strategy Philips has embedded sustainability in its strategy and will continue to create value for all our stakeholders, including its shareholders and employees Visit for more information 36 2

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